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3/05/2014

How to use New Buys of Top funds to find position trades

Working People need to focus on few things if you want to position trade. One of the best list published monthly by IBD is New Buys of Top-Performing stock Funds for Past Three Months.

This list is published in first 7 days of the month either on Tuesday or Wednesday. The list looks at Universe of mutual funds and ranks funds by 3 month performance and selects the funds in top 1/3rd by rank. Then they calculate the new buys of those funds and provide how many millions worth of a stock those funds hold.

Aggressive funds buying drives big moves in stock. Mutual funds are not the only players in the market currently, many hedge funds now are bigger than mutual funds. But still the list is valuable tool for Working People to find big ideas.

Obviously just because a fund bought a stock, it is not immediate buy. You still need to wait for a setup. If you want to profit from this list then you have to maintain a watchlist for a year or so of these ideas and curate it by dropping a stock only if it completely break down. Same set of stocks become good shorts once they top and these funds start to off load their big positions.

It is a data mining exercise that looks at what better performing focus on. While the information is dated as it is few months old, it still is very valuable for position traders. Many of these stocks are not one quarter wonders, some of them go on to make multi quarter or multi year move.

You can also create this kind of list yourself monthly if you have access to Morningstar funds holding data.

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If you are serious about your trading and want to build an enduring edge theStockbee Member site might help you.